Property · 7 min read
Section 54 & 54F: Save Capital Gains Tax by Reinvesting in a House
By the India Law Simplified editorial team · Verified against primary government sources (bare Acts & official portals) · Last updated 2026-04-12
Sold a property or another long-term asset at a gain? Sections 54 and 54F let you avoid tax on that gain by reinvesting in a residential house in India — if you meet the conditions and timelines. Here is how each works.
1Section 54 — selling a residential house
Section 54 applies when you sell a long-term residential house and reinvest the capital gain in buying another residential house (within one year before or two years after the sale) or constructing one (within three years). The capital gain is exempt to the extent you reinvest.
You can claim it even if you already own other houses. From recent years the reinvestment for full exemption is capped (a high limit — verify the current figure), and exemption into two houses is allowed once in a lifetime if the gain is within the prescribed limit.
2Section 54F — selling any other long-term asset
Section 54F applies when you sell a long-term asset that is NOT a residential house (shares, gold, plot of land, etc.) and invest the NET SALE CONSIDERATION (not just the gain) in one residential house, within the same time limits as Section 54.
Key condition: on the date of transfer you must not own more than one residential house (other than the new one). If you invest the entire net consideration, the whole gain is exempt; if you invest only part, the exemption is proportionate.
3The Capital Gains Account Scheme (CGAS)
If you cannot reinvest before the due date for filing your return, deposit the unutilised amount in a Capital Gains Account Scheme account with a bank before that date — this preserves the exemption. Use it for the purchase/construction within the time limit, or the unused amount becomes taxable later.
If the new house is sold within three years, the exemption you claimed is withdrawn and taxed. Keep sale deeds, purchase/construction proofs and bank records, and report it in Schedule CG of your ITR.
Frequently asked questions
What is the difference between Section 54 and 54F?
Section 54 is for selling a residential house and reinvesting the GAIN in another house. Section 54F is for selling any other long-term asset and reinvesting the NET SALE CONSIDERATION in one house, with a condition on how many houses you already own.
Do I have to reinvest before filing my return?
Not necessarily — but any amount you have not reinvested by the return due date should be deposited in a Capital Gains Account Scheme account to keep the exemption, and used within the time limit.
Is this tax advice?
No. Capital-gains exemptions are fact-specific and the limits change. Confirm your eligibility and the current caps with a Chartered Accountant.
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